World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Friday, April 23, 2010

With some behind the scenes help we finally managed to get Martin out of the hole. He has already jumped back onto his typewriter to talk about "The Paradox of Solution."

Reading his paper, it certainly sounds like a paradox. On the one hand history shows that we need to press the limits and experience failure before we can implement meaningful change. Yet on the other hand we see the need to reform prior to collapse in order to prevent events from unfolding the way that history teaches us they will.

I have been corresponding with Martin and he has been picking up on some of the solutions that I’ve been recommending in Freedom’s Vision. In this document he is now chanting Bill Still’s line about the importance of WHO controls the money. Martin is not, however, all the way there yet in his understanding of the money trail/ system and the role of the Federal Reserve in corrupting government.

To fully understand what’s happening, one needs to follow the ownership and money trail created when the 12 Reserve banks were formed by the Federal Reserve ACT. This is where to look to truly see WHO’s behind our money system. Martin had already fallen in line with Freedom’s Vision on the major point of producing our own sovereign money and swapping that money for debt in an equity for debt swap. There are two areas, however, where I disagree with Martin in terms of a solution. The first is the need for a global currency – currencies do not need to be traded into a global currency, they can easily be valued against one another directly, especially in the age of computers. The problem with having some international standard is that some body of people must control it – the WHO part.

Having such a middle-man currency, may ease the way people think about international trade, but in fact the question to ponder is WHO sets the exchange value, what mechanism is used? There is no need for a mechanism if one country is trading directly with another, the exchange will happen at whatever exchange rate the market will naturally bear – no need to first exchange into a global currency, and no need for any exchange market to be created that would be under anyone’s control.

This is hard for most people to conceptualize because we want to label everything. No matter what country we are in we want to price oil, for example, in dollars. It simply doesn’t have to be that way, if you are in Mexico, you can simply buy oil directly in pesos. That means that the country who produced the oil has to be willing to take the pesos in exchange and hold them knowing that they can later spend those pesos somewhere else on something else. If they fear the value of the Peso will not hold up over time, they will demand more pesos for their oil. That’s all the mechanism you need – no reserve currency, no exchange that some entity owns and makes billions from, completely not necessary.

If any existing currency is chosen as the world’s “reserve” currency then the world is conceding a large portion of control to those so designated. Is it possible to set up a global currency not based upon an existing currency, one that doesn’t act as money that can be spent, one that only acts as a medium of exchange? Yes, that’s possible, let’s call it The “Reserve.”

The only way to make such a global currency fair to everyone is to keep the bankers away from it! Such a world reserve would have to exist only in a central global exchange where an independent international panel would run the exchange, allowing traders to set the price of each nation’s currency in relation to the Reserve. Thus commodities would be priced in the Reserve and each nation would have to always be aware of their local currency’s exchange value in relation to the Reserve. This is a huge and complex bucket of worms, vulnerable to all the problems of any exchange. Who runs the exchange, are there fees to make exchanges? The questions and complexities are endless, again, it’s a market that simply does not need to exist. For example, if I decide to go to Canada tomorrow, I don’t need to exchange into an international currency, I simply cross the border and exchange directly from U.S. dollars into Canadian dollars. Anytime anyone suggests a new or reserve currency, the question to first ask is WHO? If they tell you no one, immediately raise the BS flag!

The other point I disagree with Martin on is the role of the FED.

When Martin says “…the Fed never had any regulatory control over investment banks who created this nightmare.” He is completely oblivious to the fact that the Investment banks OWN/ ARE the Fed! All other statements and meanings by Armstrong surrounding this issue are therefore false in my judgment and should be ignored.

The Fed is THE problem, the failure of the SEC is a symptom. The SEC has been corrupted and co-opted by the WHO (that actually produces the money) behind the Fed. Neither the Fed nor the Treasury actually produce any money in the current system, it is all produced by the banks! Yes, the Treasury is responsible for actually printing greenbacks, but all new money is ultimately borrowed from private entities! This is the root of the problem! Martin’s points in this paper about the markets leading the Fed on interest rates is irrelevant. What’s far more important is following the payments of interest on the national debt and seeing who’s productive efforts produce that money and seeing into who’s hands that money eventually lands. Money, being a construct of man MUST, as in will always, have man behind the control of the quantity in one way or the other. What’s most important is creating complete transparency, producing money as an asset not a liability, separating special interests from the quantity decision, and having some type of independent control over the quantity of money itself.

Those are two major points, but the fact Martin is advocating sovereign money and talking about WHO controls it is a giant step in the right direction.

Equity futures are flat this morning, the dollar index is higher, bonds are lower, oil and gold are both slightly lower.

Yesterday’s action saw a large move lower with an even larger reversal to close slightly higher. The action over the past few days has produces a symmetrical triangle in the SPX which makes it appear that we have formed a sideways wave 4 formation that will most likely lead to a wave 5 higher. That triangle is outlined on the 30 day, 30 minute SPX chart below:

If that pattern is playing out, we may need to descend one more leg down into the triangle and then bounce back up – hey, just in time for a Monday ramp job?

Both the NDX and RUT made new highs yesterday, once again the market is not moving to new highs together, it is requiring the rotational trade to do so, the same type of action that was occurring all during late 2006 and most of 2007 prior to October of that year.

Spreads have continued to ramp for Greece and most of Europe, the Euro hit another new low overnight, evidently this was enough pressure to get Greece to capitulate and ask the IMF for loans, this is according to a Bloomberg report. If true, the people of Greece had better get busy and run their government out or they will be staring at a future owned and controlled by the central banks – a fate I certainly wouldn’t want to leave to my children.

The headline on Bloomberg says, “U.S. Durable-Goods Orders Excluding Transportation Jump by Most Since 2007.” Sounds terrific! Yet, when you go to look at the details you will find that durable goods orders for March FELL by 1.3% when the consensus was looking for a positive .4% increase. Not to worry, because when you remove aircraft orders from it (besides military hardware about the only thing we still know how to make), it was positive. This is the ridiculous type of reporting and hype that just seems to never stop. Here’s Econoday’s cheerleading:

HighlightsAircraft orders pulled down the headline number but otherwise, durable orders look great. New orders for durable goods in March dipped 1.3 percent after gaining a revised 1.1 percent in February. The headline number came in well below market forecasts for a 0.4 percent rise. Excluding the transportation component, however, new durables orders spiked 2.8 percent, following a revised 1.7 percent rebound in February. Transportation fell 12.9 percent in March with civilian aircraft leading the decline, decreasing a monthly 99.5 percent. Outside of transportation, gains were widespread.

On the upside were primary metals, up 3.5 percent; machinery, up 8.6 percent; electrical equipment, up 4.9 percent; and "other" durables, up 0.1 percent. In addition to transportation, fabricated metals decreased-by 1.2 percent.

Nondefense capital goods orders excluding aircraft gained another 4.0 percent in March, following a 2.1 increase the month before. Shipments for this category-and source data for equipment investment in GDP-rose 2.2 percent in February, following a 1.5 percent increase the month before.

Year-on-year, overall new orders for durable goods in March were up 11.9, compared to 11.4 percent in February. Excluding transportation, new durables orders improved to 13.5 percent from 8.5 percent in February.

The year over year figures are up, but not because of growth, it is because the previous March was a complete freeze that had fallen below the previous February.

This same type of easy year over year comparison has many people fooled into believing that earnings season has been terrific. Remember that a year ago in the first quarter our economy was frozen solid, nothing moved. So let’s say a company managed to earn a grand total of ten cents, if they now earn twenty cents then their profit rose by 100%! What’s important is the trailing price to earnings figures which are still far above historic norms – that means that stocks are expensive. Future and “operating” P/E’s are nothing more than a marketing tool, forget them – they are forecasts made by marketing people who may actually believe they are accountants or corporate executives – they are all marketing, you have seen time and again how accurate their forecasts are.

(CNN) -- As the country was sinking into its worst financial crisis in more than 70 years, Security and Exchange Commission employees and contractors cruised porn sites and viewed sexually explicit pictures using government computers, according to an agency report obtained by CNN.

"During the past five years, the SEC OIG (Office of Inspector General) substantiated that 33 SEC employees and or contractors violated Commission rules and policies, as well as the government-wide Standards of Ethical Conduct, by viewing pornographic, sexually explicit or sexually suggestive images using government computer resources and official time," said a summary of the investigation by the inspector general's office.

More than half of the workers made between $99,000 and $223,000. All the cases took place over the past five years.

The inspector general's report includes specific examples of misuse by employees.

A regional office staff accountant tried to access pornographic Web sites nearly 1,800 times, using her SEC laptop during a two-week period. She also had about 600 pornographic images saved on the hard drive of her laptop.

Separately, a senior attorney at SEC headquarters admitted to downloading pornography up to eight hours a day, according to the investigation.

"In fact, this attorney downloaded so much pornography to his government computer that he exhausted the available space on the computer hard drive and downloaded pornography to CDs or DVDs that he accumulated in boxes in his office," the inspector general's report said.

"It is nothing short of disturbing that high-ranking officials within the SEC were spending more time looking at pornography than taking action to help stave off the events that brought our nation's economy to the brink of collapse," said Rep. Darrell Issa. The Republican is a ranking member of the House Committee on Oversight and Government Reform.

"This stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority," he said.

"Inexplicably, rather than exercise its existing regulatory enforcement authority, SEC officials were preoccupied with other distractions."

The investigation came to light on the same day President Obama gave a speech in lower Manhattan, calling for reform in the finance industry.

My, that’s an interesting one. Again the timing on this release certainly makes me go “hmmmm.”

All I can say is that the degeneration of morals and ethics across the entire spectrum is simply amazing, it is reminiscent of late stage Roman Empire.

Thursday, April 22, 2010

Equity futures are substantially lower this morning following yesterday’s mixed closed. The Dollar is stronger, the Euro is weaker continuing to break beneath short term support on Greek debt concerns. The IMF is fanning those concerns talking about contagion into other countries of Europe. The daily chart of the Euro is below:

According to Bloomberg, “The International Monetary Fund on April 20 called rising state debt the biggest threat to the global economy.”

Why do you suppose the IMF (group of central bankers) would say something like that? Keep in mind their goal is to produce debt obligations on their desktop PC (bonds) in order to indebt the nations of the world. They don’t really care how “risk filled” it may be, they simply want the power and control that comes via the use of the debt which they perform no productive effort in order to create.

Meanwhile, those who do spend their lives in the pursuit of productive effort, the workers in Greece, are going out on their fourth strike of the year in protest of being controlled with debt. First the people of Iceland saw through the debt game and now the people of Greece are not putting up with it either, that’s a most promising development for the world from my point of view. The people need to rise up, these debt issues are the key issues holding back progress of mankind.

The PPI came in smoking hot for the month of March, rising .7% for the month, but up a whopping 6.1% year over year. Yes, the year over year figure is in relation to the freeze up, but it is still significant. The PPI price tends to lead the CPI. Here’s Econoday talking about the weather again:

HighlightsProducer price inflation unexpectedly surged as atypical winter freezes jacked up food prices and gasoline made a partial comeback. The overall PPI rebounded 0.7 percent after declining 0.6 percent in February. The boost in March was considerably above analysts' expectation for a 0.4 percent increase. At the core level, the PPI inflation rate was steady with a 0.1 percent gain that also matched market forecasts.

The jump in the headline PPI was led by a 2.4 percent spike in food prices, after a 0.4 percent rise in February. The March surge reflected the loss of some vegetables to atypically cold winter weather in key growing regions in the U.S. For the latest month the fresh and dried vegetables category surged a monthly 49.3 percent.

At the core level, inflation is almost nonexistent outside of commodities related gains. According to the BLS, 85 percent of the core rise came from higher jewelry prices due to higher gold and other metals costs.

For the overall PPI, the year-on-year rate jumped to 6.1 percent from 4.6 percent in February (seasonally adjusted). The core rate year-ago pace edged down to 0.8 percent from 0.9 percent the month before. On a not seasonally adjusted basis for March, the year-ago increase for the headline PPI was up 6.0 percent while the core was up 0.9 percent.

Inflation at the producer level jumped in the latest month but much of it is temporary as food price inflation will ease as crops from other regions come into play, adding to supply. And while high, oil prices have steadied.

Bond yields could firm on today's headline number, combined with a notable drop in initial jobless claims. But flight to safety may offset as Wall Street bashing appears to be today's sport and as worries about Greece have resurfaced.

Jobless claims fell back to “only” 456,000 for the prior week. Here’s some cheerleading:

HighlightsInitial jobless claims fell back to trend in the April 17 week, coming in at a largely as-expected 456,000 and reversing two weeks of administrative delays that swelled claims to as high as 480,000 in the prior week (revised from 484,000). The 456,000 level compares with 445,000 in the March 20 period, offering a flat comparison at best to gauge monthly payroll change. Despite the distortions of the prior two weeks, the four-week average shows a similar comparison: at 460,250 vs. 454,000 at mid-March. Continuing claims for the April 10 week fell 40,000 to 4.646 million with the four-week average down slightly to 4.644 million.

Today's results are a relief that confirms administrative and not economic factors behind the earlier climb. But even so, the current comparison with March doesn't show the kind of positive momentum that was expected for April following March's big payroll gain. Stocks firmed slightly in initial reaction to the report.

The FHFA Home Price Index sunk further into negative territory. This index had worked its way back to zero but the year over year price change is accelerating downwards again, falling 3.4% year over year versus the prior month’s 3.2% price drop year over year.

HighlightsHome prices for government sponsored mortgages remain under downward pressure despite improvement in sales. The FHFA purchase only home price index slipped 0.2 in February on a seasonally adjusted basis, following a 0.6 percent decline the month before. On a year-on-year basis, this index was down 3.4 percent, compared to down 3.2 percent in January.

For the nine Census Divisions, seasonally adjusted monthly price changes for month-ago February ranged from minus 1.7 percent in the South Atlantic Division to up 1.9 percent in the Middle Atlantic Division. Although the U.S. dip for February is a little disappointing, the fact that some portions of the country are seeing modest price increases is encouraging. Four of the nine Census Divisions showed gains for February. The big question is what is going to happen to prices after the end of the special homebuyer tax credits in April. Prices could temporarily soften further.

Is it just me, or does that chart seem to correspond pretty well with this chart? Look at the end of year climb back towards zero price decline, that corresponds pretty closely to the trough in the chart below. If they do correspond, we should see continued pressure on home prices moving forward.

Existing home sales jumped 6.8% in March. Year over year home sales jumped 16.1%, again keep in mind that comparible is against March '09 where there was a complete freeze occuring. In this case, it is spring time, so you expect the month over month increase, I think you'll find that by July of this year, these sales numbers will not look so good as the effect of the tax credit wears off:

HighlightsSales of existing homes rose as expected in March but still show a less-than-robust pace ahead of this month's expiration of second-round stimulus. Existing home sales rose 6.8 percent to an annual rate of 5.35 million with February revised slightly downward to 5.01 million. Details are solid including a 7.3 percent gain for the key single-family component and evenly distributed gains across regions.

Supply fell back to 8.0 months from February's 8.5, and the median price rose 3.7 percent to $170,700 with the year-on-year comparison once again positive at 0.4 percent. All cash sales remain very high, at 27 percent, reflecting tight credit and low home prices. Distress sales rose 3 percentage points to 36 percent with first-timers making up 44 percent of total sales, up 2 percentage points from February.

Though the housing market is still soft, the National Association of Realtors believes second-round stimulus "has done its job" and is not asking Congress for another extension. The NAR said foreclosures are being absorbed at a "manageable" rate. Stocks are edging lower following the report.

Zero Hedge has an article in which Richard Koo states exactly what I’ve been saying all along about the banks being insolvent should they be forced to mark their assets to market. The opening paragraph is a classic, and Koo is right, of course.

Richard Koo's latest observations on the US economy are as always, a must read. The critical observation from the Nomura economist explains why the realists and the naive idealists are at greater odds than ever before: the government continues to perpetuate, endorse and legalize accounting fraud in the hope that covering everything up under the rug will rekindle animal spirits. The truth, as Koo points out, is that were the FASB to show the real sad state of affairs, the two core industries in the US - finance and real estate, would be bankrupt. "If US authorities were to require banks to mark their commercial real estate loans to market today, lending to this sector would be extinguished, triggering a chain of bankruptcies as borrowers became unable to roll over their debt." In other news Citi, Bank of America, and Wells just reported fantastic earnings beats on the heels of reduced credit loss provisions. Nothing on the conference call mentioned the fact that all would be bankrupt if there was an ounce of integrity left in financial reporting, and that every firm is committing FASB-complicit 10(b)-5 fraud. One day, just like Goldman's mortgage follies, all this will be the subject of epic lawsuits. But not yet. There is some more money to be stolen from the middle class first, by these very firms.

Koo is 100% correct, but commercial real estate is only one part of the cover-up. Residential real estate and other derivatives are the other two parts. Mark all of those assets to market and the largest banks in America fail – no if, ands, or buts. This will become evident over time, Ponzi schemes based on accounting fraud always come to an unfortuitous end.

Speaking of Ponzi schemes, the SEC just shut down a Florida man, accusing Mr. Shapiro of using new investors to pay prior investors while skimming millions from his grocery buying and distribution business. This will be an interesting one to see unfold as there appears to be some legitimate business occurring there on the surface, probably more legitimate than Goldman’s, so let’s see how this one plays out once his defense attorneys get into motion. The media has already hung him. The SEC had better make sure they go after the biggest Ponzi players too, the rule of law is only truly protected when it is applied equally to everyone.

Did you realize that our government is giving out money to prevent people from becoming homeless? It’s true, the following article tells the story of a mortgage broker turned hamburger flipper ($70k per year to $10 per hour, but hey, statistics count him as employed), who can no longer pay his rent and is in danger of being forced onto the streets. A tragedy of our economy and a victim of the Ponzi for sure. However, to step in and pay his rent for him is yet another “safety net” that when added to all the others certainly makes not working more attractive than flipping burgers. It’s a slippery slope and this article dives into some of the problems the government, with no set procedures, are having giving away the billions they possess. Here’s a link:

Returning to the markets this morning, bonds are higher which shows money flowing away from more risk filled assets like oil and gold which are both down hard, oil is currently down 2%.

Qualcomm earnings report was not strong and their stock is down about 7%. This is a big deal as demand for their chips is not as strong as the pundits were expecting. Their chips go into almost all mobile devises. Then this morning Nokia got trounced for reporting bad earnings, they are down 15% this morning.

Yesterday’s see-saw action produced a small movement in the McClelland oscillator, so we can expect a large directional price move which is already occurring as I type this morning. When under these conditions, knowing that occurred will often make me hold onto a short term position longer than I might have otherwise.

The market is clearly overextended and wound up having great difficulty getting through strong overhead resistance. The DOW closed just below the 200 week moving average yesterday and is pulling back away from it this morning. Below is a 3 month chart with weekly bars showing how we pinned the 200 wma (red line) and are now pulling back:

The market is still sitting on a VIX market sell signal, following that signal the VIX spiked, then fell back and is now rising sharply again:

Below is a chart from Sentimenttrader.com showing the percent of mutual fund cash. On a percentage basis the amount of cash held by fund managers is at the lowest point in modern history. This is yet another bullish extreme, one that clearly shows the majority of institutional investors are long the market, another sign that a top is in or approaching:

A close in the markets below SPX 1,200 could mean that a meaningful correction is beginning. I would not, however, remain short should we exceed the highs put in last week.

Hey, talking about the IMF always gets me thinking about the pushers of debt, they do far more damage to the world than the pushers of drugs.

Wednesday, April 21, 2010

Equity futures are close to even following a slew of earnings reports overnight (market moving higher after the open). The dollar made a relatively strong move higher overnight, the Euro is down and is poking below upslopping support. Long bonds are shooting higher, in the direction that usually means money is driving away from equities. Both oil and gold are roughly flat.

The completely wild and worthless MBA Purchase Application Index was reported as reversing last week’s 10.5% plunge by jumping 10.1% in the past week! Riiighht, a 20% swing in one week? Give me a break. This is exactly the type of “economic” report that shows how badly twisted and distorted the data has become. They do not give any base to measure against, only percentage change – worthless. Nevertheless, people watch it due to a lack of any real or meaningful data, so here’s Econoday’s take on the weather and the never-ending end of the housing tax credit which is supposedly gone at the end of this month, this time for real…

HighlightsThe approaching deadline for second-round stimulus is giving a big lift to purchase applications which jumped 10.1 percent in the April 16 week. Though the latest week shows a big jump, the month-on-month comparison shows only a modest gain. A dip in interest rates gave a lift to refinancing applications which jumped 15.8 percent. The average 30-year mortgage rate fell 13 basis points in the week to 5.04 percent. The outlook for the housing sector, at least for April, is improving though questions remain about the mid-year outlook. Existing home sales will be posted on Thursday with new home sales out Friday.

Look for the housing data to substantially worsen by about the July timeframe.

Apple produced a terrific first quarter with great numbers, good for them. Yahoo reported and it was not liked by the market as they are losing market share. WFC reported a $2.5 billion profit, but is selling on their release, MS swung to a profit and is gaining. Boeing profit dropped 15% yet they are higher pre-market.

In a humorous turn of events, Bloomberg is reporting that it is AIG who insures Goldman’s Board of Directors against lawsuits.

April 20 (Bloomberg) -- American International Group Inc., the financial firm rescued by the U.S., is the lead insurer of Goldman Sachs Group Inc.’s board against shareholder lawsuits, said a person with knowledge of the policy.

AIG is among firms that sold so-called Side A directors and officers’ coverage to the New York-based bank, said the person, who declined to be identified because details of the policy are private. Goldman Sachs was sued last week by the Securities and Exchange Commission, which claimed it misled investors in 2007.

Gee, yet another reason why Hank Paulson would ensure that AIG stays afloat? Just another example of their being no adults in the room.

Hank Paulson went so far outside the rule of law while he was in Treasury that now the Pew Research Center survey shows that only 22% of Americans trust government. That means that nearly 80% of Americans no longer trust government. This is a complete reversal from when Eisenhower was in office and these surveys were first taken, at that time it was 73% of Americans trusted government.

Those who follow Martin Armstrong’s writing will know that this swing in sentiment was forecast by him as a part of the longer term economic cycle where trust swings from the public sector and back to the private sector. What may be different in this cycle is that I’m not sure the trust is really left in the private sector either. Who do you trust at this point?

If you haven’t seen Bill Black’s opening statement at the House Financial Services hearing on Lehman Brothers failure, you should take a couple of minutes to do so:

Take a mental snapshot of Mr. Black, that’s what an ADULT acts like. There have been no adults in government for at least the past decade. By letting the children run so wild for so long we are now at a point where financial reform simply is not enough. You can’t invoke financial reform with teeth or you crater a paper bubble economy.

Financial reform at this point will not work to save the economy in the long term, that’s because the root of the problem is not financial, it is monetary. Yes, we have severe financial problems still, but those are symptoms of the pressure built up by the never ending growth mantra caused by backing our money with debt. There actually is no money, it is all debt as it all came into being as somebody else’s liability.

The move higher yesterday was on lower volume once again. While the internals improved over Monday’s, there was a divergence seen in the number of issues over their 10 and 30 day moving averages, as they both fell against rising price.

Once again a normally very reliable bearish H&S pattern blows up. Prior to the rally over the past year, that was a very rare occurrence. The slope of the recent rise is dangerously steep. Parabolic moves tend to come in three phases where the slope begins gradually, then in the middle is slightly steeper, and in the final phase produces a more vertical blow off. If you go back and look, you will find these parabolic moves all over the place. It’s typical that there is a break of the uptrend just prior to shifting gears into the next move. If that’s happening here, we may be about to enter a near vertical move. That would be very dangerous in both direction if so as it is impossible to know where such moves end, and when they do end they end quite suddenly. This discussion so far is just supposition as we have not yet even made new highs.

It looks like we may be making those new highs today and the VIX is back below 16 once again and in the complacent zone. It’s been a little over a week since we received the market sell signal from the VIX, I would still be cautious and not assume that the risk to the market has gone away. Those extreme readings that went along with it (611 new highs & record low put/call) are usually signs that a significant top is near. If we make new highs in the indices today, then we’ll have to watch the slope of the rise to see if we’re entering a parabolic type of move.

Tuesday, April 20, 2010

Equity futures are higher again this morning, the dollar is slightly lower, bonds are higher, oil and gold are also both slightly higher.

There is no meaningful economic data released today, we’ll see MBA Purchase Applications tomorrow and then we’ll get some more data going into the end of the week including PPI and Existing Home Sales.

Goldman stock is slightly higher after they reported earning $3.5 billion or $5.59 per share. Yeah, that should make you angry. How do they earn that kind of loot? By manipulating the markets, by selling derivatives all over the world, and by marking their own assets to whatever value they feel is necessary to make their bonuses sufficient.

Just look at the billions that have been reported by the “banks” so far this earnings season, it’s staggering. Just remember that all those false earnings can easily be reversed simply by changing accounting rules. They totally play games with the stock and bond markets as well, and everything seems to be okay as long as they get their way with the politicians, however, the day they are meaningfully attacked, look out, they will pummel the markets again in order to get their way.

Yesterday I listened to a podcast by Mark Hanson on what’s happening with real estate. Terrific interview, it will leave you with no doubt that there is more pain coming down the pike:

It looks like about half the flights in Europe have resumed, but the volcano is still spewing ash off and on. Evidently that chain of volcanoes has a history for extended and chain reaction eruptions. This may be a story that plays out for quite some time, if so it will continue to impact the transports.

Yesterday’s positive market numbers diverged against the market internals which were almost all negative. New highs fell dramatically, the McClelland worsened, and decliners outnumbered advancers. This is typical of corrective types of moves, not moves in the primary direction.

The DOW is not too far from making a new high although the indices all produced what appears to be Head & Shoulder patterns that look nearly complete. Should the DOW rise to new highs, its H&S pattern would be invalidated there, of course, and that is typical for this paper/ false accounting rally of the past year. Bearish patterns seem to magically blow up and bullish ones confirm. We’ll see, it hasn’t made that high yet.

Below is a 10 day, 10 minute chart of the SPX showing the Head & Shoulders pattern:

The Asian markets managed to put in a small positive number last night, but the previous session tripped a new sell signal for both the Hang Seng and the Nikkei. The Hang Seng Point & Figure diagram is below, the bearish target is about another 5% lower. That type of move would definitely affect world markets.

The P&F diagram for crude oil also tripped a bearish target of $78 a barrel, that reverses a prior signal that was looking for an oil price north of $100.

That’s about all I have for today, the financials generate false profits, they use their phony money to buy one another’s stock and drive the markets higher to make even more false profits. Quite the virtuous cycle they have created for themselves. Goldman’s reputation, however, is now so soiled that candidates are returning donations from them. LOL, how long do you figure that will last?

Monday, April 19, 2010

Equity futures are lower, the dollar is higher, Euro lower, bonds are roughly flat, oil is being pummeled and gold is also lower.

So called “leading indicators” come out at 10 Eastern, otherwise the week is a fairly slow one for economic releases, but obviously an important one in regards to the markets.

The suit against Goldman is certainly raising a bunch of questions. Importantly nothing has really settled that down over the weekend and GS is lower still this morning. Of course other banks were involved in doing the same types of things, and there are definitely international implications.

The XLF was hit hard on Friday, below is a 3 month chart showing that the trendline of the unbelievable run up was finally broken by the news and on extremely heavy volume:

The type of heavy volume we saw across the board on Friday is typical of the beginning of a large trend change. The downside volume on Friday was 93%, a panic selling day. The number of new lows fell from its Wednesday high of 611 all the way back to 218. The VIX roared all the way from the lower Bollinger to the upper, but closed inside. This movement produced a breakout signal on the VIX Point & Figure chart with an upside initial target of 28:

Normally you would expect a pause in the markets following a day like Friday. It is a Monday as well, so don’t forget that Pavlov’s sheep have now been conditioned to buy the dips. That’s a set up that could prove to be painful for those who stick around too long.

The Iceland volcano did not let up and there have now been tens of thousands of cancelled flights. This should impact the transports hard, it should also affect oil which we are already seeing. FedEx and UPS both said that international shipments have been greatly impacted.

And the latest news shows that the ash cloud is now spreading east and will be on the Canadian east coast by this morning.

Not to worry about little things like that, though. No, you see Citi Bank, an insolvent zombie “earned” $4.4 billion in the first quarter! Gee, they might as well just called it $4.4 quadrillion and just anointed themselves Kings of the Land of Fantasy.

New financial regulations? Sure, I’ll believe it when I see it. Of course the problem is that creating any legislation with teeth means that the required never ending growth becomes impossible - we can't have that now, can we? That will strangle the economy and will clearly demonstrate why, at this point, they are darned if they do and yet they are darned if they don’t.

One day’s action does not a trend make, so we need to be careful and keep an eye on trendlines. So far only a couple of sectors have actually broken trend. We’ll need to see more selling pressure if we’re ever going to truly see a stormy market Monday…